US DOJ Petitions Supreme Court in Anadarko Royalty Case

WASHINGTON (Dow Jones Newswires), Jul. 14, 2009

The U.S. Department of Justice on Monday appealed to the Supreme Court to reject a lower-court ruling that blocked the Interior Department from collecting as much as $10 billion in oil fees.

In January, a federal appellate court sided with Anadarko Petroleum Corp. (APC) in a controversial and precedent-setting case, finding the government couldn't collect royalties from eight oil and natural gas production leases in the Gulf of Mexico.

Though the case involved only Kerr McGee leases now owned by Anadarko, the ruling affects a raft of other oil and natural gas companies that had signed leases in the Gulf between 1996 and 2000. Estimates vary, but the government said it could mean $10 billion in royalties never recovered.

The leases were signed under the Outer Continental Shelf Deep Water Royalty Relief Act of 1995 -- designed to encourage expensive offshore oil and gas development. Anadarko argues the law specifically prevented the collection of royalties until a minimum volume of oil and gas production had been met, while the DOI says the law gave it discretion to collect royalties at a price threshold.

The case is one of several oil-royalty issues that gave fodder to Democratic lawmakers who are seeking to move the country away from fossil-fuel use and toward renewable energy.

Interior Secretary Ken Salazar has said he will restructure the royalty program, raising rates for oil companies and revenues for the federal government.  

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